So, the second point, and the fourth if you read more than just the part you highlighted show that it is indeed intended to provide loans to banks, either via nation states or not.

As for governments, consider the EFSF a form of insurance. Sure, Spain and Italy contribute, but other countries in the EU and IMF are contributing more, and it is leveraged up.

Heh. Wouldn't it be less embarassing to simply admit you blew it with your characterization of the EFSF's mandate and move on Dan? I'd ride you a little, but it wouldn't undermine your central point that the Euro remains stable, and that would surely be better than eroding your credibility with a transparent attempt to rehabilitate a clearly erroneous statement (i.e. that the EFSF is designed to shore up banks, rather than governments). This stuff's complicated--smarter folks than you or I regularly get the details wrong. C'mon, buddy--own up.

Meanwhile, I note that the yields on Greek 1-year debt have reached 629%. Somehow, the market just doesn't seem to believe that a bailout is in the offiing.

Machiavelli wrote:Heh. Wouldn't it be less embarassing to simply admit you blew it with your characterization of the EFSF's mandate and move on Dan? I'd ride you a little, but it wouldn't undermine your central point that the Euro remains stable, and that would surely be better than eroding your credibility with a transparent attempt to rehabilitate a clearly erroneous statement (i.e. that the EFSF is designed to shore up banks, rather than governments). This stuff's complicated--smarter folks than you or I regularly get the details wrong. C'mon, buddy--own up.

I own up to be wrong on the impression that it is only designed to bail out banks. Clearly it's intended to bail out both banks and governments. Some governments will not need bailing out unless they have already had to deal with the effects of failing banks (eg Spain).

But that national governments are putting into it who may end up getting bailed out by it is not necessarily a major flaw. Over here we have a scheme whereby banks had to contribute to a fund that would be used to bail out banks if they got near collapse. Those at higher risk had a higher rate of contribution to make (hey - that's one way of dealing with the 'moral hazard - mandatory insurance!).

You do realise that part of the deal is that people who own Greek debt will take a 50% or so 'haircut'? No wonder they are even less attractive to buy now.

But that national governments are putting into it who may end up getting bailed out by it is not necessarily a major flaw.

Except that they aren't actually "putting into it" but rather pledging to put into it. Insurance wouldn't work very well if one only had to pay one's premiums at the precise moment that one couldn't pay one's premiums (the idea is so bad, I'm surprised President Obama didn't come up with it!)

You do realise that part of the deal is that people who own Greek debt will take a 50% or so 'haircut'? No wonder they are even less attractive to buy now.

Actually, the number that's been bandied about is 70% (entirely "voluntary" of course). Problem is that a 649% yield on one year debt implies a current value of something in the neighborhood of 10% of par--which means the market thinks it's roughly twice as likely that Greece will simply default within the next year than it is that she will pay even 30 cents on the Euro (and that's despite some pretty serious interventions to support Greek bond prices by the ECB).

Heh. The FinMins' announcement that they've agreed to a bailout deal has sent Greek 1-year bond deals to 763%. That, my friends, is what total lack of credibility looks like.

I will be shocked if Euro one makes its way to Greece prior to its disorderly default sometime shortly after March 20.

Greek debt deal seems doomed to fail. Ohmygosh! Who could have ever predicted this? Oh, that's right...me.

Hmm. heaven forbid that the Thunderer (one nickname for the Telegraph over here) might put a negative spin on a story out of Europe...

Basically, they are saying that the deal will be seen as a technical default if it is not 100% volunraty. Which it is - if bondholders are taking a 53% haircut without agreement, then it's a partial default. What it really is is a managed default and so far avoiding a currency change.

The real question is what will happen after that. So far they qualify for the bailout money, and it's being agreed across Europe (Ireland's referendum is not actually likely to affect things much either way, unless Ireland's own austerity kick fails and they need cash). The election is the main question mark, really. But things do look less bleak than they did back in December.

Interestingly (and not commented on by Mr Predicto - "by January 1, 2013, France and Germany will no longer be using the same currency as Italy and Spain") was that despite various 'warnings' and 'concerns' recent bondsales in Italy and Spain went better than expected and for lower rates, too.

I checked outside, still not many food riots.

We'll see, Dan. We'll see.

Indeed we shall. 10 euros says your prediction I quoted above does not come to pass, if you've changed you mind about gambling.

As it goes, the warnings on Greece may encourage more of that country's creditors to volunteer for the haircut on the basis that they risk losing even more if default occurs. 47% of something may be a better bet thana risk of 100% of nothing.

Markets soar after Greece clinches debt-swap deal

So...

Machiavelli wrote:I will be shocked if Euro one makes its way to Greece prior to its disorderly default sometime shortly after
March 20.

Given that Greece now qualifies for the second bailout, looks like you are out by around 130 billion euros and a fair amount of time. Better take something for that shock...

Funds have not yet flowed (and are not due to until 3/20 at earliest) and finance ministers continue to make noises about Greece missing austerity targets. We shall see...

Odd, Mach. The IMF today agreed a 28 billion Euro package to Greece, with about €1.6b going over immediately.

That's IMF money, which is somewhat different from the Euro-area deal (which has significant conditions precedent (including meeting austerity targets) that Greece simply can't meet).

Note the IMF recently cancelled a facility for Greece that had remaining availability of 8.7 billion, so with the 1.6 billion that goes over tomorrow, Greece is actualy 7.1 billion in the hole vis-a-vis where they were with the IMF a month ago. The remaining 26 billion of the facility announced today is contingent on Greece meeting the conditions of the Euro-area bailot, which, again, it just can't do.

Meanwhile, Spain makes another loop around the drain...

Err.... the 28 billion deal replaces the old facility. The maths looks a bit different when you take full account of how much in total and when it was going to apply.

And your prophesy didn't specify that it had to be the Euro-area money - how 'shortly' was your 'shortly after March 20, by the way? Mind you, a fair amount of the IMF money will have come from EU nations and Euro members. Horst Reichenbach didn't suggest that failure was imminent today. A lot to do, but the work has already started.